It will be Britain's most eagerly anticipated and possibly most important business inauguration next year. After six years at the helm of the world's second biggest drug company, controversial GlaxoSmithKline boss Jean-Pierre Garnier will take his leave and usher in heir apparent Andrew Witty.

Witty is direct, abrasive and ambitious. Just 43, his appointment comes at a pivotal moment not just for GSK but for the entire industry.

Anyone who put money into pharmaceutical shares seven years ago would have seen their investment dwindle alarmingly. Health risks associated with a several major treatments have hit revenues hard.

GSK has been particularly badly hit. Two weeks ago it suffered a fresh blow when American regulators delayed approval of the group's cervical cancer vaccine Cervarix. Analysts said this was likely to delay the drug's launch in the US by at least six months. Earlier this year, sales of its diabetes drug Avandia plummeted by about 50 per cent after reports linking it to heart attacks.

But more fundamentally, Big Pharma is an industry with a business model unfit for the 21st century.

Since the 1950s, companies have relied on producing blockbuster medicines from time to time and then jealously protecting their intellectual property - to the cost of the world's poor, according to anti-poverty campaigners. In recent years, though, big breakthroughs have become costly and harder to attain. Consequently the drug pipeline has withered. GSK is in this respect no different from many of its peers. And GSK is also facing competition from cheaper generic versions of its products, including Paxil and Wellbutrin, for depression.

The solution has been to consolidate to maintain share-price momentum. This was why, seven years ago, Glaxo Wellcome merged with SmithKline. Today most analysts say the merger has been an unmitigated disaster, destroying shareholder value.

To many, Garnier leaves a poisoned legacy. But defenders of the French-born executive who sparked controversy over a £16m pay package say he has bequeathed among the strongest pipelines in the pharmaceutical industry with some 15 products launched, approved or filed this year. Whatever the verdict, Witty faces an awesome challenge. He has to reinvent a new business model for a British enterprise whose products and know-how are in use throughout the world.

In some respects Witty arrives at a fortuitous moment. As the world's economy weakens, pharmaceuticals traditionally have been regarded as a defensive stock. This should enable Witty to breathe easier, initially.

But that's where his advantage ends. Top of his in-tray will be the task of dealing with the likelihood that the next US president - seen as near-certain to be a Democrat - will cut the huge margins drugs companies make from the country's healthcare system.

Then there will be the dilemma of whether to sell or expand its cash-generative consumer division, which makes the powdered drink Horlicks and paracetamol brand Crocin. There is some suggestion that Witty will choose to grow this side of the business.

But the most intriguing - and biggest - decision Witty will have to make is whether to seek a merger with UK rival AstraZeneca. A £32bn tie-up has been long mooted and has much to recommend it. It would create a UK national champion that would in theory be capable of taking advantage of the new wave of biotech drugs that will come on stream in coming decades. It is an area that Astra has recently bought into, unlike GSK. But investors would need a lot of convincing that a merger would be in their interests after the way GSK has underperformed the market since it was created. Furthermore, since GSK's share price has bombed, any deal would need a significant slug of cash to whet the appetites of AstraZeneca shareholders.

Witty is one of a new generation of big pharma chiefs. In July, Severin Schwan, 40, became chief executive of Roche - maker of Viagra -after leading the expansion of the Swiss company into diagnostic tools to find patients who respond to its medicines. Last year, David Brennan became chief executive officer of AstraZeneca.

With healthcare set to be a boom industry across the world, the rewards for its leaders could be immense. The question is whether they capable of creating a sustainable new order.